Corelogic's new shadow inventory report shows a jump to 2.1 million homes from 1.9 million last year. These are homes that are seriously delinquent, foreclosed, or bank-owned, which are not reported in the 4.2 million units of unsold supply.

Analysts like Calculated Risk were expecting a number between 1.5 million and 2 million.

In the chart below you can see how much pending inventory is waiting to flood the market. The total supply of 6.3 million units has returned to the worst levels of 2008. And that doesn't even include delinquencies of less than 90 days, which would push the shadow inventory up to 7 million.

When the shadow inventory hits the market, expect major downward prices on homes.